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The COVID-19 pandemic has had a significant impact on the banking and capital markets (B&CM) industry as liquidity, rates and fees continue to be stressed and regulatory and business-driven demands evolve rapidly.
The pandemic’s disruption of global supply chains and markets has created significant market volatility, driving interest rate cuts and increasing the need for governments, companies and individuals to access funding and debt. B&CM organizations had to act quickly to stabilize foundational operations and provide liquidity into the market while ensuring they could respond at pace to rapidly shifting global economic trends.
Many B&CM firms have downgraded their revenue forecasts for 2020, and are looking to restructure their client-facing product mix, reduce risky assets, free-up liquidity and reallocate scarce funding. Still, the finance function must continue to meet operational and regulatory requirements while also providing stakeholders with more timely access to risk-weighted data and analytics that can support predictive decision-making.
In the near future, B&CM finance teams must remain laser-focused on closing the books and producing financial, regulatory and operational reporting while continuing activities that relate to manual stress testing, reserve calculations and risk-based forecasting.
The agile finance teams that have already cultivated predictive financial, risk- and liquidity-based scenario modelling capabilities will have the chance to rise above their peers by providing views that support strategic planning, risk monitoring and execution of response.
Once the first phase of stabilization is underway, finance can then scan opportunities for cost optimization, intelligent automation and service-delivery-model transformation while creating a more effective value-realization framework and business-partnering capabilities.
The COVID-19 pandemic should not be a reason for B&CM finance functions to stop transformations or scale back capabilities they have worked so hard to build in response to earlier regulatory and business pressures. Indeed, now is the perfect time to design and start implementing an agile and future-ready finance capability, as the crisis has prompted most organizations to review their existing operations and consider how they need to change to deal more effectively with the next wave of disruption.
Finance leaders should acknowledge and address the current hardship, but also look at this time as a unique opportunity to respond and deal with tactical issues; reset specific capabilities as the effects of the pandemic begin to dissipate and ultimately renew the finance function. Organizations that can balance short-term interventions with strategic capability enhancements will be best positioned to lead in the post-COVID world.
In my next post, I’ll delve deeper into these three steps for a path forward in the post-pandemic era.
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